A division of operations can entail considerable tax disadvantages. Therefore, it is well-advised to avoid a division of operations in advance. For this purpose, the factual characteristic of the personal connection is usually dissolved. This can be done, for example, by the Wiesbaden model, the Kinder GmbH or the unanimity agreement.

In the video we show you various strategies to avoid a division of operations in advance, as well as in retrospect or to consciously maintain it.

1st unanimity agreement

If there is a social agreement that there must be unanimity in incoming legal transactions, a division of operations can be prevented in advance. It should be noted that the regulated unanimity must refer to all legal transactions. If it were to relate only to exceptional transactions, there would still be control if shares are owned by at least 51%, since then the transactions of daily life can be determined by this shareholder alone.

In addition, the regulated unanimity must also be implemented, which is expressly prescribed by the Nuremberg Tax Court, so that the prevention of personal connections is actually achieved.[234] For example, in the case of a holding company under civil law, which is attributable 2/3 to the husband and 1/3 to the wife, and a working capital company, in which the husband holds 100% of the shares and an essential operating basis, which is provided for use, there is a division of operations, since the husband can enforce his will to do business in both companies. However, if no other provision on the legally standardized unanimity in legal transactions was prescribed in the Besitz-GbR by the articles of association, then the personal connection for a division of operations is not given. The husband holds 2/3 of the shares in the property GbR, but cannot achieve unanimity alone.

As described in the contribution of personal entanglement – family shares, attribution of the shares of spouses is considered unconstitutional. Due to this contractual agreement, the division of operations with all its legal consequences is avoided and the Besitz-GbR earns income from renting and leasing (§ 21 EStG).

securing the group of persons

As a avoidance strategy, in order to unbundle the division of operations by eliminating the element of human interconnection, a unanimity requirement should be required in the case of a controlling group for a possible sale of shares to a third party. Without this addition, a shareholder can execute a sale of shares with which he was part of a controlling group without further arrangements. This sale may result in the dissolution of the controlling group of persons on the part of a company and the end of the division of operations with all taxation of the hidden reserves. However, if the group of persons has the abovementioned unanimity requirement, the group of persons is protected from a decision of an individual shareholder and can only decide unanimously to sell its shares.[236]

The Wiesbaden model describes a company construct of spouses in which one spouse participates in the owner and the other spouse in the operating company. The spouse shares are not added together, so that a uniform will to act and thus the personal connection is not fulfilled.[237] A sole fulfilment of the material interconnection by a transfer of use of an essential operating basis has no tax consequences, since a division of operations is only fulfilled if both conditions are met. A participation of both spouses in one of the two companies can already be detrimental to the described model in individual cases, but a division of operations is excluded if the separate participations are carried out exactly according to BFH[238].

In the application of this model, a division of operations with its legal consequences is avoided, although many of the business and tax advantages are nevertheless given. For example, the limitation of liability of fixed assets is secured by the Wiesbaden model, since the operating company leases them from the holding company. Furthermore, the use of losses from the operating company, which offers a tax advantage for both spouses in the context of the co-investment, is also given by this model. A disadvantage, however, is that a division of operations is only prevented during a lifetime by the model, since the shares are redistributed by an inheritance or a Berlin Testament[239] and a division of operations could arise as a result.[240]

4th “Kinder GmbH Modell”

A solution for the retirement of a self-employed person offers the following possibility to generate passive income at retirement age and to enable a transfer of the business to the children, as well as to prevent the harmful legal consequences of the division from the outset. The children establish a GmbH, which employs them as managing director – if desired also the father as consulting managing director. This GmbH leases the business of the independent father with the corresponding aim of operating it within the framework of the commercial company. The stay of the property allows a limitation of liability and the father receives passive income through the lease.

This model was approved by the BFH in 1984 in the case in which the children are also qualified on the basis of their knowledge to manage the GmbH and accordingly also the company without the intervention of the father. Personnel integration was therefore not given due to the lack of uniform willingness on the part of the owned company, since the children are only involved in the company GmbH. It should be noted, however, that a loss according to § 10d EStG, for example caused by losses from the ownership company, does not pass to the heirs (children in this case) and the offsetting potential of the losses could be lost by this arrangement, although with a different structure the children can make the losses apply.[242] A profit or loss forecast is therefore reasonable to carry out before a planned company postponement.

5th spin-off model

The commercial infection of all income could also be caused by the so-called divestment model in a previous partnership with independent income. In doing so, the “Independent GbR” is managed far away from a holding company and a commercial operating company. The holding company derives commercial income from the letting and leasing and the operating company by virtue of its legal form or activity. The self-employed GbR receives the status of self-employed income and is not burdened with the trade tax liability.